United Arab Emirates Business Forecast Report Q4
2012

United Arab Emirates Business Forecast Report Q4 2012

Core Views The UAE's reputation as a 'safe haven' in a volatile region will continue to serve the economy well, although growth will slow in 2012 as global headwinds pick up.

Deleveraging will remain a prominent theme well into 2013, as corporates continue to focus on repairing their balance sheets.

This will limit activity in the non-hydrocarbon economy.

Abu Dhabi will outperform Dubai over the coming years given its large-scale investment plans targeting the infrastructure sector and ongoing concerns surrounding Dubai's lingering debt repayment schedule.

A further tightening in international sanctions on Iran bodes poorly for Dubai's outlook given its trade linkages with the Islamic Republic.

Despite a recent uptick in tensions between the government and domestic Islamist opposition groups, our core forecasts envision broad political stability over the coming years.

Major Forecast Changes Given the deteriorating external environment, we have lowered our 2012 real GDP growth forecast to 2.9%.

Key Risks To Outlook Any outbreaks of public unrest would have significant repercussions for the country's reputation as an inherently stable environment for foreign investment.

A further uptick in tensions between the West and Iran could result in a deterioration in the UAE's sovereign risk profile given the close proximity and deep trade ties between the two countries.

With global growth slowing, downside risks to oil prices in 2012 are elevated, which could undermine the UAE's already fragile macroeconomic recovery.

• Executive Summary
  • Core Views
  • Major Forecast Changes
  • Key Risks To Outlook
• Chapter 1: Political Outlook
  • SWOT Analysis
  • BMI Political Risk Ratings
  • Domestic Politics
  • A Delicate Balancing Act
  • In light of an uptick in tensions between the government and Islamist groups (both at home and abroad), we have lowered the UAE's
  • short-term political risk rating to 81.9 (out of 100) from 84.0. Going forward, the government's response to growing calls for greater
  • political reforms will be crucial in determining the country's political risk profile. A strong security clampdown on Islamist groups could
  • risk provoking a violent backlash, while efforts to appease demands for more conservative social policies could undermine the UAE's
  • attractiveness for foreign tourists and investors
    • TABLE: POLITICAL OVERVIEW
  • Long-Term Political Outlook
  • Three Challenges For The Coming Decade
  • The UAE is not without its challenges. However, it is one of the more stable Gulf states over the long term, with a small, wealthy
  • population; no history of terrorism; and no sectarian tensions to speak of
• Chapter 2: Economic Outlook
  • SWOT Analysis
  • BMI Economic Risk Ratings
  • Economic Activity I
  • Battling Through Global Headwinds
  • We expect economic activity in the UAE to slow through the latter months of 2012, and are forecasting real GDP growth of 2.9% this
  • year, down from an estimated 4.2% in 2011
    • TABLE: ECONOMIC ACTIVITY
  • Economic Activity II
  • Misplaced Optimism
  • Recent signs of life in certain segments of the UAE's real estate sector and ongoing progress in debt restructuring negotiations are
  • certainly cause for becoming more optimistic on the country's near-term outlook. That said, we believe some investors have become
  • overly enthusiastic on the economy's potential trajectory over the coming quarters, and we believe that greater caution is warranted
  • Balance Of Payments
  • Current Account Surplus To Narrow
  • The UAE's external position will remain on solid ground over the coming years, with strong hydrocarbon revenues keeping the current
  • account firmly in the black
• UNITED ARAB EMIRATES - CURRENT ACCOUNT
  • Monetary Policy
  • Inflation To Remain In Low Single-Digits
  • We see little risk of a significant uptick in inflationary pressure in the UAE in H212, particularly as ongoing deflation in housing prices
  • (particularly in Abu Dhabi) is set to weigh on the headline CPI print over the coming months
• UNITED ARAB EMIRATES - INFLATION
  • Banking Sector
  • Banking Sector: Uncertain Policy Backdrop
  • We expect the ongoing recovery in the UAE banking sector to gradually gather steam in 2012, although stress that our forecasts
  • continue to see the aggregate balance sheet of the industry expanding by only 8.0% this year
  • UAE: PERCENTAGE LIMITS THAT CONSTITUTE LARGE EXPOSURE
• Chapter 3: 10-Year Forecast
  • The UAE Economy To 2021
  • Greater Caution, Slower Growth
  • After its recent experience of boom and bust, we are forecasting a slower but more sustainable growth trajectory for the UAE over the
  • next five to 10 years. Consumer spending will remain the key driver of GDP. However, investment and government spending are also
  • significant, and this relative dependence on domestic demand puts it at some degree of risk
    • TABLE: LONG-TERM MACROECONOMIC FORECASTS
• Chapter 4: Business Environment
  • SWOT Analysis
  • BMI Business Environment Risk Ratings
  • Regional Business Environment
  • BE Update: GCC Leading The Way
  • The business environment in the Middle East & North Africa remains as diverse as ever, with Israel and the Gulf Cooperation Council
  • continuing to offer a relatively attractive investment climate, while the rest of the region lags behind. Below, we identify the key
  • takeaways from BMI's recently updated business environment ratings for 2012
  • Business Environment Outlook
    • TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
    • TABLE: BMI LEGAL FRAMEWORK RATING
    • TABLE: LABOUR FORCE QUALITY
  • Market Orientation
    • TABLE: MIDDLE EAST AND AFRICA - ANNUAL FDI INFLOWS
    • TABLE: TRADE AND INVESTMENT RATINGS
  • Operational Risk
    • TABLE: TOP EXPORT DESTINATIONS
• Chapter 5: Key Sectors
  • TABLE: PHARMACEUTICAL SALES INDICATORS 2008-2016
  • TABLE: PATENTED DRUG MARKET INDICATORS 2008-2016
  • TABLE: PRESCRIPTION DRUG SALES INDICATORS 2008-2016
  • TABLE: OTC MEDICINE SALES INDICATORS 2008-2016
  • TABLE: GENERIC DRUG SALES INDICATORS 2008-2016
  • TABLE: TELECOMS SECTOR - FIXED LINE - HISTORICAL DATA & FORECASTS
  • TABLE: TELECOMS SECTOR - INTERNET - HISTORICAL DATA & FORECASTS
  • TABLE: MONTHLY BLENDED ARPU
  • TABLE: TELECOMS SECTOR - MOBILE - HISTORICAL DATA & FORECASTS
• Other Key Sectors
  • TABLE: AUTOS SECTOR KEY INDICATORS
  • TABLE: INFRASTRUCTURE SECTOR KEY INDICATORS
  • TABLE: FOOD AND DRINK SECTOR KEY INDICATORS
  • TABLE: DEFENCE AND SECURITY SECTOR KEY INDICATORS
  • TABLE: OIL AND GAS SECTOR KEY INDICATORS
  • TABLE: FREIGHT KEY INDICATORS
• Chapter 6: BMI Global Assumptions
  • Global Outlook
  • The Cycle Has Turned
    • TABLE: GLOBAL ASSUMPTIONS
    • TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST
    • TABLE: REAL GDP GROWTH CONSENSUS FORECASTS
    • TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST